[Federal Register Volume 60, Number 100 (Wednesday, May 24, 1995)]
[Notices]
[Pages 27562-27567]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-12764]
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LEGAL SERVICES CORPORATION
Audit Guide for LSC Recipients and Auditors
AGENCY: Legal Services Corporation.
ACTION: Proposed guideline.
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SUMMARY: The Legal Services Corporation (LSC or Corporation) hereby
publishes for comment by interested parties a proposed Audit Guide for
Legal Services Corporation Recipients and Auditors (Audit Guide). The
Audit Guide will replace the audit portions of both editions of the
current Audit and Accounting Guide for Recipients and Auditors (Audit
and [[Page 27563]] Accounting Guide). The Audit Guide will be
maintained as a separate document, under the authority of the LSC
Office of Inspector General. The accounting and financial reporting
requirements of the Audit and Accounting Guide will remain in effect
until amended in the future.
The proposed Audit Guide prescribes the use of Government Auditing
Standards (GAS or GAGAS), with guidance under Office of Management and
Budget (OMB) Circular A-133. The Audit Guide establishes a uniform
standard under which recipient audits will be conducted; it simplifies
audit requirements by adopting standards that are widely recognized in
the federal and nonprofit audit communities; it provides for the
effective implementation of recommendations designed to streamline the
monitoring of recipients for compliance; and it eliminates the
obsolescence of LSC audit requirements that date from the 1980's.
There will be five appendices to the new Audit Guide, which in
themselves establish no new rules, regulations or guidelines for
recipients.
DATES: Comments should be received in writing on or before June 23,
1995. Late comments will be considered to the extent practicable. Where
possible comments should reference applicable paragraph numbers in the
proposed revision. To facilitate conversion of the comments in computer
format for analysis, respondents are asked to send a copy of the
comments on either a 3.5 or 5.25 inch diskette in ASCII format.
ADDRESSES: Comments should be submitted to the Office of Inspector
General, Legal Services Corporation, 750 First St., NE., 10th Floor,
Washington, DC 20002-4250.
FOR FURTHER INFORMATION CONTACT: Karen M. Voellm, Chief of Audits (202)
336-8830.
SUPPLEMENTARY INFORMATION: The Legal Services Corporation Act, Sec.
1009(c)(1) requires that the Corporation either directly ``conduct, or
require each grantee, contractor, or person or entity receiving
financial assistance'' from the Corporation to provide for an annual
financial audit. Historically, the Corporation has chosen to require
recipients to provide the audit pursuant to Corporation audit guidance
provided in the Audit and Accounting Guide.
On Tuesday, July 30, 1976, the Legal Services Corporation published
in the Federal Register its Audit and Accounting Guide for Recipients
and Auditors (41 FR 29951-29979). Pursuant to section 1008(e) of the
Legal Services Corporation Act (42 U.S.C. 2996(g)(c)), the Corporation
thereafter requested (41 FR 32794) and received comments from
interested persons. The Audit and Accounting Guide became effective on
October 4, 1976.
On July 19, 1977, the Corporation published a notice instructing
recipients to use the revised Audit and Accounting Guide that had been
distributed in June of 1977. (42 FR 37077). The instruction was
effective immediately upon publication. There were additional
unpublished revisions in September 1979 and 1981 and a separate
Fundamental Criteria of an Accounting and Financial Reporting System;
each was issued directly to grant recipients.
On February 20, 1985, the Corporation published a notice of
availability of a revised Audit and Accounting Guide that had been
distributed February 11, 1985. (50 FR 7150). The notice established a
ninety-day period for the submission of comments. On November 29, 1985,
after adoption by the Corporation's Board of Directors, the final
publication of the revised Audit and Accounting Guide appeared in the
Federal Register. (50 FR 49276). This version of the Audit and
Accounting Guide became effective January 1, 1986. Shortly thereafter,
however, the Corporation gave recipients the option of using either the
September 1981 or the January 1986 version of the Audit and Accounting
Guide. Today, recipients are still permitted to follow either Audit and
Accounting Guide.
The proposed Audit Guide makes one major change in current
standards. All financial statement audits for periods ending on or
after December 31, 1995, will be conducted pursuant to GAGAS rather
than just the less comprehensive Generally Accepted Audit Standards
(GAAS). As a result of the change to GAGAS, much of the detail of the
audit portions of the current Audit and Accounting Guides is replaced
by reference to the well-established and documented GAGAS.
GAGAS requires auditors, in the conduct of an audit of an entity's
financial statements, to plan and design audit procedures to assess
compliance with laws and regulations that have a material effect on the
financial statements, and to assess the related internal controls.
GAGAS also contains requirements relating to the auditor's professional
qualifications, the quality of the audit effort, and the contents of
meaningful audit reports. GAGAS is widely recognized as audit
requirements that provide audit coverage that is broad enough to help
fulfill the reasonable needs of potential users of the audit report,
and is more comprehensive than the current GAAS requirements of the
Corporation's Audit and Accounting Guides. GAGAS standards are the ones
that nonprofit organizations receiving federal assistance are required
to follow pursuant to the requirements of OMB Circular A-133.
Currently, LSC recipients receiving significant amounts of federal
funds are already required to arrange for audits conducted under GAGAS,
and at least 45% of LSC recipient audits for FY1993 were conducted
under GAGAS.
For LSC, for its grant recipients and for Congress, a switch to
GAGAS produces a number of benefits.
First, as already noted, the most obvious benefit of GAGAS audits
is that a more thorough examination of the recipient's financial
activities is made and a more comprehensive report on compliance with
laws and regulations and on the maintenance of internal controls is
provided to the Corporation and the public. In addition, auditors
qualified to perform GAGAS audits are more likely to provide a high
quality service than auditors not so qualified. As a result, the
recipients' boards of directors and the Corporation will be provided
higher quality and more extensive oversight information regarding the
activities of local recipients and their staffs. For reasons such as
these, GAGAS are the standards deemed by Congress to provide the
appropriate level of accountability for audits involving taxpayer
funds. Adopting GAGAS demonstrates the Corporation's and recipients'
commitment to ensuring high levels of such accountability.
Second, a requirement that recipient annual financial statement
audits be done in accordance with GAGAS simplifies the content of the
Audit Guide and reduces the resources needed to develop it and keep it
up-to-date. With audit requirements defined by the American Institute
of Certified Public Accountants (AICPA) (GAAS) and the Comptroller
General of the United States (GAGAS), the Corporation needs only to
identify for the auditor supplemental, Corporation-specific
requirements imposed by the Corporation's Act, appropriations laws or
regulations. Along with these savings to the Corporation, recipients
will also benefit from simplification; the potential for conflicting
audit requirements among varied grant sources will be reduced.
Third, with the advent and development of the Corporation's Office
of Inspector General and its special responsibility for and expertise
in areas of audit policy, it has become advantageous and prudent to
separate [[Page 27564]] the audit and accounting guidance into two
separate Guides and to place authority over the Audit Guide in the OIG.
Consistent with the Inspector General Act of 1978, as amended, and with
practice throughout the federal government, the OIG will develop
Corporation audit policy, establish audit requirements, maintain the
Audit Guide and its appendices and review recipient audited financial
statements to assure that they meet the standards of the Audit Guide.
The Corporation, its recipients and the Congress will all benefit by
having expert and centralized audit guidance to refer to.
Fourth, it is arguable that the Corporation is required by the
Inspector General Act of 1978, as amended, to adopt GAGAS. Under
Section 4 of that Act, the Inspector General is to provide policy
direction for Corporation audits and to assure that audits conducted by
non-Federal auditors complies with standards established by the
Comptroller General, of which GAGAS is a prime example. Moreover, GAGAS
are now the standards for audits of substantial amounts of federal
funds distributed to nonprofit service providers either directly by
federal agencies, or through state and local government intermediaries.
The Corporation's special status as a DC private nonprofit corporation
distributing funds that are federal in origin may not be a sufficient
practical or legal reason to distinguish Corporation audits from other
federal audits.
Fifth, the two current Audit and Accounting Guides have both become
out of date. Both accounting principles and auditing standards have
evolved significantly during the past decade. In addition, the
persistence of two versions of the Audit and Accounting Guide, as the
result of an unresolved controversy dating to 1986, causes continuing
confusion regarding applicable standards and inconsistency in financial
reporting by recipients. A new, single Audit Guide will bring the
Corporation's audit guidance up to date and eliminate the confusion.
Sixth, in May of 1994, the OIG published its Audit Report of
Grantee Monitoring. The audit reviewed LSC's performance of its on-site
monitoring function. It disclosed, in part, that the former monitoring
system duplicated to a large degree the work of the independent public
accountants. The audit disclosed that about half of the recommendations
made as a result of LSC monitoring dealt with accounting, financial
management systems, and internal controls--areas covered in annual
audits by the grantees' independent public accountants (IPAs). This
duplication was costly and unnecessary. In addition the report noted
that monitoring activities were believed to be overly invasive by LSC
grantees.
The findings and recommendations of the Audit Report of Grantee
Monitoring, as well as the obsolescence of LSC's audit guidance,
signaled a need to adopt auditing standards that would permit the
effective assessment of certain fiscal areas by the IPA as part of the
annual audit, as well as promote uniformity in the audits of LSC
recipients. Adoption of GAGAS facilitates the implementation of an
expanded role in testing and reporting on compliance requirements by
recipients' IPAs. For this reason, one of the major recommendations of
the performance audit of monitoring--that the Corporation expand its
use of IPAs in monitoring--is workable and efficient only if GAGAS are
applied to the audits.
There will be five appendices to the proposed Audit Guide. One of
the appendices to the Audit Guide will be a new Compliance Supplement
which will identify the financial-related regulations that auditors
should examine in the course of the recipients' annual audit and will
contain suggested audit procedures for the auditor to assess compliance
with applicable laws and regulations. The other appendices will include
a sample audit agreement, a model format for audited financial
statements, the Corporation's pre-existing Fundamental Criteria for an
Accounting and Financial Reporting System for LSC Recipients and a
Guide for Procurement of Audit Services. Because the appendices
themselves establish no new rules, regulations, or guidelines for
recipients, they are not published for comment and will be promulgated
without formal adoption by the Corporation's Board of Directors.
For the reasons set forth above, LSC proposes the Audit Guide read
as follows:
Legal Services Corporation Audit Guide for Recipients and Auditors
Foreword
Under the Legal Services Corporation (LSC) Act, LSC provides
financial support to organizations that furnish legal assistance to
eligible clients. The Act requires that LSC either conduct or require
each recipient of LSC funds to provide for an annual financial
statement audit.
In 1976, LSC adopted an Audit and Accounting Guide for Recipients
and Auditors of LSC funds. The Audit and Accounting Guide was amended
several times through 1981. Then, effective January 1, 1986, a fully
revised Audit and Accounting Guide was published, but LSC subsequently
declared the 1986 Audit and Accounting Guide to be just an alternative
to rather than a binding replacement of the amended original Audit and
Accounting Guide.
In 1995, LSC promulgated the following Audit Guide to replace the
audit portions of both the original and the 1986 Audit and Accounting
Guide. In addition, LSC will attach five appendices to this Audit Guide
for use by recipients and auditors.
Appendix A. A Sample Audit Agreement which contains provisions LSC
recommends recipients consider incorporating in their audit
agreements.
Appendix B. Model Format for Audited Financial Statements and
Footnotes.
Appendix C. The Compliance Supplement provides notice to both
recipients and their auditors of the general federal requirements
and the specific LSC regulations which are to be tested for
compliance. The Compliance Supplement will change as LSC rules,
regulations and guidelines are adopted, amended or revoked, but it
establishes no new rules, regulations or guidelines itself.
Appendix D. The Fundamental Criteria of an Accounting and Financial
Reporting System, previously promulgated by LSC. It establishes
minimum standards for the elements of an adequate accounting and
financial reporting system.
Appendix E. A Guide for Procurement of Audit Services, prepared by
the LSC Office of Inspector General (OIG) in the spring of 1994 and
revised in 1995. This Guide is intended to assist recipients in
planning and procuring audit services.
It is anticipated that the accounting portions of both the original
and the 1986 Audit and Accounting Guide will also be replaced in the
future.
Table of Contents
I. Introduction
I-1 Purpose
I-2 Required Standards and Guidance
I-3 Authority
I-4 Effective Date
I-5 Revisions and Supplements to the Guide
I-6 Cumulative Status of Revisions
I-7 Financial Responsibilities of Recipients
II. Audit Performance Requirements
II-1 Audit Requirements
II-2 Review of Internal Controls
II-3 Assessing Compliance with Laws and Regulations
II-4 Audit Follow-up
III. Audit Reporting Requirements
III-1 Audit Reports
III-2 Management Response
III-3 Report Distribution
IV. Reference Materials
Appendix
Appendix A Sample Audit Agreement [[Page 27565]]
Appendix B Model Format for Audited Financial Statements and
Footnotes
Appendix C Compliance Supplement
Appendix D Fundamental Criteria of an Accounting and Financial
Reporting System for LSC Recipients
Appendix E Guide for Procurement of Audit Services by Legal
Services Corporation Recipients
Authorities: The Legal Services Corporation Act of 1974, as
amended, sec. 1008(a) and (b),(42 U.S.C.2996g(a) and (b)); sec.
1009(c)(1),(42 U.S.C. 2996h(c)(1)); and sec. 1010(c),(42
U.S.C.2996i(c)); The Inspector General Act of 1978, as amended, 5
U.S.C. App. 3, sec. 4(a)(1); and sec. 4(b)(1).
Introduction
The Office of Inspector General (OIG) of the Legal Services
Corporation (LSC) is responsible for establishing and interpreting LSC
audit policy pursuant to a resolution adopted by the LSC Board of
Directors on May 13, 1995. The OIG will periodically revise the Audit
Guide and related audit policies and will review audit reports to
ensure compliance with appropriate auditing standards and the policies
prescribed by the Audit Guide. The OIG will examine the audits to
identify reported control deficiencies, questioned costs and financial-
related instances of noncompliance. Program-related findings and issues
identified in the review of the audit reports will be forwarded to
management for action.
I-1. Purpose
This Audit Guide provides a uniform approach for audits of LSC
recipients and describes recipients' financial responsibilities with
respect to the audit. The Audit Guide is to be used in conjunction with
the Compliance Supplement (Appendix C). The Audit Guide and the
Compliance Supplement provide the auditor flexibility in planning and
performing the audit, encourage professional judgement in determining
the audit steps necessary to accomplish audit objectives, and do not
supplant the auditor's judgement of the audit work required in
particular situations. The suggested procedures included in the
Compliance Supplement do not cover all the circumstances or conditions
likely to be encountered during the course of an audit.
I-2. Required Standards and Guidance
Audits of recipients, contractors, persons or entities receiving
financial assistance from LSC (all hereinafter referred to as
``recipients'') are to be performed in accordance with Generally
Accepted Auditing Standards (GAAS); Government Auditing Standards (GAS
or GAGAS) issued by the United States General Accounting Office (GAO);
Office of Management and Budget (OMB) Circular A-133, Audits of
Institutions of Higher Education and Other Not-for-Profit
Organizations; and this Audit Guide.
For purposes of OMB Circular A-133, LSC is to be considered a major
program. The Compliance Supplement (Appendix C) is to be followed for
LSC funds. Accordingly, the OMB Compliance Supplement for Audits of
Institutions of Higher Learning and Other Non-Profit Institutions does
not apply to LSC programs.
The requirements of the Audit Guide apply to all recipients and
subrecipients of LSC funds, except where specific provisions have been
otherwise made through grant or subgrant agreements. This Audit Guide
is not intended to apply to grants to law schools, universities or
other special grants, which are covered by special provisions.
Exceptions to these requirements will be determined by the OIG in
conjunction with LSC management.
I-3. Authority
This Audit Guide has been prepared under the authority provided by
the following sections of the LSC Act and the IG Act:
Records and Reports--LSC Act sec. 1008:
(a) The Corporation is authorized to require such reports as it
deems necessary from any recipient, contractor, or person or entity
receiving financial assistance under this title regarding activities
carried out pursuant to this title.
(b) The Corporation is authorized to prescribe the keeping of
records with respect to funds provided by grant or contract and shall
have access to such records at all reasonable times for the purpose of
insuring compliance with the grant or contract or terms and conditions
upon which financial assistance was provided.
Audit--LSC Act sec. 1009(c)(1):
The corporation shall conduct or require each recipient,
contractor, or person or entity receiving financial assistance under
this title to provide for an annual financial audit.
Recipients' Non-LSC Funds--LSC Act sec. 1010(c):
Non-Federal funds received by the Corporation, and funds received
by any recipient from a source other than the Corporation, shall be
accounted for and reported as receipts and disbursements separate and
distinct from Federal funds. * * *
Duties and Responsibilities * * *--IG Act sec. 4(a)(1) and 4(b)(1):
4(a) It shall be the duty and responsibility of each Inspector
General, with respect to the establishment within which his Office is
established--(1) to provide policy direction for and to conduct,
supervise, and coordinate audits * * * relating to the programs and
operations of such establishment. * * *
4(b)(1) In carrying out the responsibilities specified in
subsection (a)(1), each Inspector General shall * * * (C) take
appropriate steps to assure that any work performed by non-Federal
auditors complies with the standards established by the Comptroller
General. * * *
I-4. Effective Date
This Audit Guide is effective for audits of LSC programs for
periods ending on or after December 31, 1995.
I-5. Revisions and Supplements to the Guide
The OIG will periodically revise the Audit Guide and its appendices
through bulletins or replacement sections. Revisions may reflect
changes to corporate regulations, auditing standards, funding
requirements, or other published guidelines. Revisions should be
incorporated into the recipient's copy of the Audit Guide, and
furnished to the IPAs by the recipients. If there are any questions
regarding the content of any revisions or supplements, please contact
the OIG prior to the audit.
I-6. Cumulative Status of Revisions
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Effective date Description
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August 1976......... Original Edition of ``Audit and Accounting Guide
for Recipients and Auditors'' Issued.
June 1977........... Revised Original Edition of Audit and Accounting
Guide Issued.
September 1979...... Revision to Pages 4-1 and 6-6.
September 1981...... Revision to Pages ii, 4-1, 6-6, VIII-3, and
addition of Page 4-2.
January 1, 1986..... Revised 1986 Edition of Audit and Accounting Guide
Effective.
[[Page 27566]]
August 13, 1986..... Regulation 1630 replaces Chapter 4 of both the
Original and 1986 Edition of the Audit and
Accounting Guide.
December 31, 1995... Chapter 6 of both Original and 1986 Audit and
Accounting Guide replaced by ``Audit Guide.''
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I-7. Financial Responsibilities of Recipients
A. Maintain Adequate Accounting System
Recipients, under the direction of their boards of directors, are
required to establish and maintain adequate accounting records and
internal control procedures. Until revised, guidance with regard to
these responsibilities is found in both LSC's Original and 1986 Edition
of the ``Audit and Accounting Guide for Recipients and Auditors,''
referred to in I-6, above. An effective financial system should
accomplish the following objectives:
1. Resources are safeguarded against waste, loss and misuse;
2. Resources are used consistent with LSC regulations and grant
conditions;
3. Management is provided with timely, accurate financial information
sufficient to manage the resources of the recipient; and
4. Reporting is reliable and in sufficient detail to demonstrate to
funding sources and the general public the recipient's commitment to
accountability for the resources with which it has been entrusted.
B. Provide Audited Financial Statements
Recipients are responsible for preparing annual financial
statements and arranging for an audit of those statements to be
completed within ninety days of the recipient's fiscal year end. The
recipients' boards of directors have the final responsibility for the
appointment of the auditor. However, consistent with the authority
granted in the LSC Act sec. 1009(c)(1), LSC reserves the right to
preclude the appointment of an auditor if experience has shown the
auditor's work to be unsatisfactory or if a conflict of interest
exists.
A written agreement between the recipient and the IPA must be
executed and, at a minimum, is to specifically include all matters
described in Section II-1 of this Audit Guide (Subsections A through
F).
Appendix A is a sample audit agreement that includes the required
matters described in Section II-1, and additional provisions that can
be used to document the understanding between the recipient and the
IPA. Recipients should consider incorporating these additional
provisions in their audit.
In connection with the procurement of audit services, recipients
should refer to the Guide for Procurement of Audit Services (Appendix
E).
II. Audit Performance Requirements
II-1. Audit Requirements
A. Objectives
The primary audit objectives are to determine whether:
1. The financial statements present fairly the financial position and
the results of operations in accordance with Generally Accepted
Accounting Principles (GAAP);
2. The internal control structure provides reasonable assurance that
the institution is managing Corporation funds in compliance with
applicable laws and regulations, and controls ensure compliance with
the laws and regulations that could have a material impact on the
financial statements; and
3. The recipient has complied with applicable provisions of federal
law, Corporation regulations and the grant agreement that may have a
direct and material effect on its financial statement amounts.
B. Reports
The IPA will prepare the following audit reports:
1. Opinion (or disclaimer of opinion) that the financial statements
have been prepared in accordance with GAAP;
2. Report on the Internal Control Structure;
3. Report on Compliance with Laws and Regulations; and
4. A Management Letter, if appropriate.
C. Qualifications of the IPA
The comprehensive nature of auditing performed in accordance with
GAS places on the IPA the responsibility for ensuring that: (1) the
audit is conducted by personnel who collectively have the necessary
skills; (2) independence is maintained; (3) applicable standards are
followed in planning and conducting audits and reporting the results;
(4) the IPA has an appropriate internal quality control system in
place; and (5) the IPA undergoes an external quality control review.
IPAs must meet the qualifications stated in Government Auditing
Standards.
D. Audit Working Papers
The audit working papers will be prepared in accordance with GAS,
and will be retained by the IPA for at least eight 1 years from
the date of the final audit report.
\1\ See GSA General Records Schedule 22, Transmittal No. 3,
February 22, 1991.
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E. Access to Audit Working Papers
The audit working papers will be available for examination upon
request by representatives of LSC and the Comptroller General of the
United States. The audit working papers will be subject to Quality
Assurance Review conducted by the LSC OIG.
F. Disclosure of Irregularities, Illegal Acts and Other Non-Compliance
If, during an audit, matters are uncovered relative to actual,
potential, or suspected defalcations, or other similar irregularities,
the IPA will comply with SAS Numbers 53 and 54. In addition, the IPA
shall notify immediately the Office of Inspector General at (202) 336-
8830.
G. Privileged or Confidential Information
GAS paragraphs 5.30 and 5.31 state: Certain information may be
prohibited from general disclosure by federal, state, or local laws or
regulations. Such information may be provided on a need-to-know basis
only by persons authorized by law or regulation to receive it. If such
requirements prohibit auditors from including pertinent data in the
report, they should state the nature of the information omitted, and
the requirement that makes the omission necessary. The auditors should
obtain assurance that a valid requirement for the omission exists and,
when appropriate, consult with legal counsel.
II-2. Review of Internal Controls
In accepting LSC funds, recipient management asserts that its
accounting system is adequate to comply with LSC requirements. As part
of the review of internal controls the auditor is required to evaluate
the effectiveness of the recipient's accounting system and internal
controls. The primary objectives of this evaluation are to ensure that
resources are safeguarded against waste, loss and misuse and that
resources are used consistent with LSC regulations and grant
conditions.
Appendix D is the Fundamental Criteria of an Accounting and
Financial Reporting System (Fundamental Criteria). It establishes
minimum standards for the elements of an [[Page 27567]] adequate
accounting and financial reporting system. The criteria contained in
the Fundamental Criteria should be considered in an auditor's
assessment of the recipient's internal control structure. The
Fundamental Criteria is in addition to, rather than a substitute for,
standard internal control checklists, and does not preclude the
exercise of appropriate auditor's judgement in assessing internal
controls.
II-3. Assessing Compliance With Laws and Regulations
The requirements set out in the Compliance Supplement (Appendix C)
are those that could have a material impact on an organization's
financial statements. Accordingly, examination of these compliance
requirements are to be included as part of the audit.
The Compliance Supplement specifies the objectives and provides
suggested procedures to be considered in the auditor's assessment of a
recipient's compliance with laws and regulations. The suggested
procedures can be used to test for compliance with laws and
regulations, as well as to evaluate the related controls. Auditors
should use professional judgement to decide which procedures to apply,
and the extent to which reviews and tests should be performed. Some
procedures require a review and evaluation of internal controls. If the
reviews and evaluations were performed as part of the internal control
structure review, audit procedures can be modified to avoid
duplication. Auditors should also refer to the grant agreements for
additional requirements.
In certain cases non-compliance may result in questioned costs.
Auditors are to ensure that sufficient information is obtained to
support the amounts questioned. Working papers should adequately
document the basis for any questioned costs and the amounts reported.
II-4. Audit Follow-up
Consistent with GAS paragraph 4.10, the auditor is required to
follow-up on known material findings and recommendations from previous
audits that could affect the financial statement audit. The objective
is to determine whether timely and appropriate corrective action has
been taken. Auditors are required to report the status of uncorrected
material findings and recommendations from prior audits. In addition,
these requirements are also applicable to findings and recommendations
issued in a management letter.
III. Audit Reporting Requirements
III-1. Audit Reports
The IPAs are to issue the reports called for in Paragraph II-1(C)
and should follow the requirements of GAS and Statement on Auditing
Standards (SAS) 74 (and any revisions thereto) for the content and
format of the reports.
III-2. Views of Responsible Officials
Consistent with GAS paragraph 7.38, auditors should report the
views of responsible program officials concerning the auditors'
findings, conclusions, and recommendations, as well as corrections
planned.
III-3. Report Distribution
Four copies of the audit reports are to be submitted to the LSC
OIG within ninety days of the recipient's year end. Under extenuating
circumstances, an extension of the ninety-day requirement may be
granted. Requests for extensions should be in writing, and directed to
the Chief for Audits of the OIG.
IV. Reference Materials
A. Title X--Legal Services Corporation Act of 1974, 42 USC 2996; Pub.
L. 93-355, amended by Pub. L. 95-222 and 98-166.
B. 45 CFR Part 1600, et seq.
C. Government Auditing Standards, issued by the Comptroller General of
the United States, 1994 Revision.
D. OMB Circular A-133, Audits of Institutions of Higher Education and
Other Non-Profit Institutions.
E. AICPA Professional Standards, Volume I.
F. AICPA Integrated Practice System, Not-For-Profit Organizations Audit
Manual.
G. Practitioners Publishing Company Guide to Audits of Nonprofit
Organizations, Seventh Edition (June 1994).
H. AICPA Statement of Position (SOP) 92-9, Audits of Not-for-Profit
Organizations Receiving Federal Awards, December 28, 1992.
I. Pursuant to LSC Regulations, 45 CFR 1630.4(g):
The Circulars of the Office of Management and Budget shall provide
guidance for all allowable cost questions arising under this part when
relevant policies or criteria therein are not inconsistent with the
provisions of the Act, applicable appropriations acts, this part, the
Audit and Accounting Guide for Recipients and Auditors, and Corporation
rules, regulations, guidelines, and instructions.
Among the OMB Circulars which might be referred to if LSC policies
are not dispositive:
1. Office of Management and Budget (OMB) Circular A-50 (Revised), Audit
Follow-up.
2. OMB Circular A-110, Uniform Administrative Requirements for Grants
and Agreements with Institutions of Higher Education, Hospitals, and
Other Nonprofit Organizations.
3. OMB Circular A-122, Cost Principles for Nonprofit Organizations.
4. OMB Circular A-123, Internal Control Systems.
5. OMB Circular A-127, Financial Management Systems.
Dated: May 19, 1995.
Victor M. Fortuno,
General Counsel.
[FR Doc. 95-12764 Filed 5-23-95; 8:45 am]
BILLING CODE 7050-01-P
